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Global Macro: Europe's on the Upswing

NEW YORK (TheStreet) -- iShares Europe 350 Index (IEV), an exchange-traded fund, rose on Monday as German business morale improved in February and as Moody's upgraded Spanish debt.

The improved sentiment -- if substantiated by hard positive economic data -- may lead to higher European equities in coming weeks.

A reading of German business morale for February reached its highest level since July 2011, suggesting the European Union could grow faster in the first quarter after modest growth last year.

The survey data, released Monday, show that the economic recovery has picked up momentum the past few months, which has been great for financial markets. Still, hard economic data have yet to find solid footing. Exports, industrial output and durable goods orders all fell in December, leading some economists to warn that the economy may be diverging from the survey's findings.

Germany was scheduled to release its fourth-quarter growth figure on Tuesday, which will give more insight into whether business morale is too optimistic.

Meanwhile, Spain received an upgrade on its sovereign debt by the Moody's rating agency on Friday. Moody's praised the country for its ability to restructure its labor market while battling a 25% unemployment rate and for narrowing its deficit.

The country's rating was cut by Standard & Poor's in January 2009, and by Fitch Ratings and Moody's in 2010.

During that time, the country was heavily invested in residential real estate, riding the credit boom higher until the market crashed, which gave way to a more export-driven model.

While growth and restructuring in the eurozone are important, external risks, as seen in Ukraine, have been on the minds of global investors as well.

News of reduced tensions in the Ukraine on Monday led to a fall in the safe-haven German bund as the market now expects Ukraine to receive aid from the West.

Recent news has been bullish for European assets, but the CurrencyShares Euro Trust (FXE) and iShares Europe look to be taking a pause at overhead resistance levels as investors await policy decisions by the European Central Bank next week.

IEV ChartIEV data by YCharts

At the time of publication, the author had no position in any of the funds mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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